New research reveals some concerning statistics for Canadians, especially for those who carry debt. In a recent survey commissioned by TD Insurance, nearly 70 per cent of respondents reported carrying debt, and 60 per cent of the respondents with the most debt said they would not know what to do to cover their expenses in the event of a sudden illness.
"Personal circumstances, particularly loss of income due to critical illness, are often completely unpredictable," said Anna Kavanagh, VP at TD Insurance, in a press release. "The last thing you want to be worried about if you have a health emergency is your finances. Obtaining the right insurance coverage, paired with saving and maintaining manageable consumer debt, will help ease the financial burden brought on by sudden illness."
"Thirty-nine per cent of Canadians surveyed said they could not afford their expenses if they lost their income for six months, a number that rose to 44 per cent for Canadians under the age of 35.
"These numbers are not surprising. According to a study conducted by TransUnion earlier this year, Canadians owed an average of $27,368 in debt in 2013, a number that is expected to climb this year. The organization estimates that the average debt will hit a record-breaking high of $28,853 by the end of 2014. Much of this debt is carried on credit cards and lines of credit. These numbers do not include mortgage debt.
"In the event of a sudden illness, TD Insurance found Canadians would need an average of $45,609 in savings to cover expenses over the course of one year, and $53,438 if they have children. Thankfully, there are two types of insurance that can help prevent sudden financial hardship due to illness.
Critical Illness Insurance
Critical illness coverage can be added to your life insurance policy, or you can purchase it as a standalone policy. This term-based coverage generally offers a one-time tax-free lump sum payment in the event the policyholder is diagnosed with one of the illnesses listed in the policy. It's important to note that not all critical illnesses are covered, and different policies cover different critical illnesses such as heart attacks, stroke, and certain types and stages of cancer. The premiums for these policies range depending on your age, your health, and the extent of your coverage. We ran the numbers for a healthy, non-smoking 35-year old male and insurance coverage started as low as $230 a year.
Who should consider this type of insurance?People who have mortgages, children, or other financial obligations such as running a business often consider critical illness insurance as it can relieve some of the financial burden that comes with being unable to work.
Disability Insurance
Disability insurance typically pays out in the event you are unable to work due to an illness or injury. This coverage offers monthly payments based on a portion of your income. Payments usually commence right away, but sometimes payment terms have limitations. Most group benefit plans come with some form of disability coverage, so check your group policy to understand how much coverage you have. If you do not have group benefits, disability insurance can be purchased as an add-on to your life insurance, or as a standalone policy.
Who should consider this type of insurance?People who do not have sufficient group benefits through an employer, self-employed individuals, small business owners, and individuals who wish to protect themselves beyond government programs such as Worker's Compensation, which only covers injuries related to your work, may want to consider disability insurance.
It is possible to have policies for both types of insurance simultaneously. One does not null the other.
Compare
Whether you choose critical illness insurance, disability insurance, or both, remember to compare rates and policies. Each policy will offer something different. Reading the fine print will ensure you're getting the coverage you need to protect you and your family financially in the event of a sudden illness or injury.
